Berezovsky v Abramovich

A little local difficulty

An oligarchs’ dispute is a feast for lawyers—and for Russia-watchers

PRIVACY from prying eyes is one reason so many of Russia's wealthiest men enjoy life in London. But the £3.2 billion ($5 billion) lawsuit between Boris Berezovsky (pictured right), Russia's best-known political exile, and Roman Abramovich (below), a confidant of Vladimir Putin and owner of Chelsea football club, is exposing a world normally guarded by libel lawyers, bodyguards and high fences around imposing mansions. In 1990s Russia, the two were associates: just how close is one of the many wrangles in the case. Their enmity now is undisputed.

The High Court case, which opened on October 3rd, dates back to 2000 when Mr Berezovsky rowed with Mr Putin and fled to London, losing much of his energy, media and mining empire in Russia in the process. He is thought now to be worth only a few hundred million pounds, whereas Mr Abramovich's fortune is in the billions. In 2007 police detained and deported a man officials say was sent to shoot Mr Berezovsky, whom Russia wants to extradite to face fraud charges that he says are trumped-up.

The lawsuit itself started four years ago, when Mr Berezovsky was finally able to serve a writ on his adversary, pouncing on him in the Hermès shop in Sloane Street (a retail district popular with plutocrats), reportedly saying: “I've got a present for you.” The legal wrangles have been complex—and lucrative for lawyers—already involving numerous appeals and consuming a great deal of court time. But the case turns on a simple question: did Mr Abramovich force Mr Berezovsky to sell his Russian assets at a low price?

Before resolving that, the court will have to decide what if any were the terms of the two men's business relationship. Even the initial arguments are giving an eye-popping insight into Russia's business climate. According to Jonathan Sumption QC, Mr Abramovich's barrister (who is fighting probably his last case before becoming a top judge), his client paid Mr Berezovsky $2 billion between 1995 and 2002 for his role as a “political godfather”. This included picking up the bill for personal expenditure on an “exuberant scale”, such as “palaces in France; private yachts and aircraft, jewels for his girlfriend, valuable paintings at Sotheby's and so on”.

Mr Sumption advised the judge, Mrs Justice Gloster, to consult Shakespeare as a guide to that era. “There was no rule of law,” he said. “Police were corrupt. The courts were unpredictable at best …Nobody could go into business without access to political power. If you didn't have political power yourself, you needed access to a godfather who did.”

Another interesting sidelight—on Russian tycoons' relationship with Western banks—came in Mr Sumption's account of how a $1.3 billion payment was made through a company controlled by an Arab princeling: an “artificial transaction” designed to satisfy money-laundering regulations, Mr Sumption said. Mr Berezovsky claims the payment was for his stake in Sibneft, an oil company; Mr Abramovich denies this. Mr Berezovsky also alleges that, at a meeting in Cap d'Antibes, Mr Abramovich threatened that if he did not sell his stake in ORT, Russia's main television channel, it would be confiscated; Mr Sumption said that meeting never happened. Mr Berezovsky also says an oral agreement was struck in London's Dorchester Hotel to put some other assets into a trust.

That may be hard to prove. But as in a nasty divorce, the parties seem willing to accept embarrassing disclosures about their own conduct in the hope of humiliating the other side more.

The case also highlights the big role of the English legal system in settling Russian commercial disputes. This includes arbitration cases in Stockholm, which are typically heard under English law and fought by English lawyers. Heidi Smith of Russian Paralegals, a start-up that supplies extra staff for law firms engaged in such cases, says that expertise and incorruptibility are two big draws. Oddly, the high cost may be an attraction of sorts too. Mr Abramovich reputedly has the largest yacht in the world. He may also boast one of the costliest lawyers. The case continues.